Every third Czech would happily switch to a competitor offering better online financial services. Are banks ready for the digital banking revolution?
- Banks aren’t innovative enough and are losing touch with clients
- More than half of Czechs with a mortgage took it out somewhere other than their primary bank
- A quarter of clients wouldn’t hesitate to share more personal information with a financial services provider in exchange for better customized services
While 82% of customers planning to purchase a new product start by going online, banks are not yet able to capitalize on the internet’s potential. 31% of Czechs would switch to a competitor offering better online banking services. Only 16% of clients think of their bank as innovative, which creates space for potential new players from the fintech sector and for improvement in services offered by established banks. According to the EY Consumer Banking Survey 2018, only 40% of Czechs took out a mortgage with their primary bank; in Slovakia, the figure is almost twice as high.
While Czechs are placing more and more trust in banks, the banks are failing to turn this into a business opportunity
Absolute client trust in banking institutions has grown by nearly half in the last four years, from 40 to 57%. A majority of clients (83%) would recommend their primary bank to others. Pavel Riegger, EY Head of Financial Services in Central Europe says“Building stronger relationships, especially with younger clients, and adapting services to their needs is a crucial step for banks. At a time of digital transformation and the gradual emergence of challengers in the form of fintech companies, clients will have a range of options for handling their capital”.
25% of the population is open to the possibility of providing more information about their activities to a bank in exchange for better, more customized services. “Many clients use banking services from multiple financial institutions and shop around for the best deals. If a quarter of the population is prepared to provide more personal information, banks have an opportunity to offer better services, satisfy specific client needs and build customer loyalty. We’ll see how many clients actually provide their information once they’re better able to manage all their accounts from one place under the European PSD2 Payment Services Directive,”explains Pavel Riegger.
Only 40% of Czechs have taken out a mortgage with their primary bank, while in Slovakia this figure is almost twice as high (78%). “There are questions as to why Czech banks are failing to offer the right conditions to their key clients or whether Slovak bankers can better predict the needs and wishes of Slovaks and thus extend more mortgages to customers. And why aren’t primary banks taking advantage of the range of benefits arising from detailed knowledge about their clients to offer mortgages or mortgage refinancing that neither their competitors nor financial intermediaries can beat?”asks Pavel Riegger.
Is an online banking revolution around the corner?
When they go online, people are most likely to go to internet banking (84%), even more so than social media (47%), e-shops (71%), or online news (60%). More than half of people (55%) would be satisfied doing their banking exclusively online, i.e. without ever visiting a brick-and-mortar branch. Czechs are not inclined to use financial services that might be offered by nonbanking players like Amazon, Google, Apple or Facebook. Only 10% of Czechs would be willing to use financial services provided by Big Tech companies. In other countries, slightly more than 20% of respondents are in favour of this method of financial management.
“Fast-growing technology companies are not yet a big threat to traditional finance houses. If banks do enough to adapt the internet and mobile banking environment, then these platforms have the potential to become a gateway to the internet for clients. In a personalized platform, a client could handle e-mail, purchase apps, make payments or read reports. Entirely new social communities and web ecosystems would arise,”says Pavel Riegger about the future of banking.
Banks don’t know how to communicate with clients and are losing touch with them
55% of the population visits a brick-and-mortar branch less often than a year ago. And they’re not phoning call centres as much, either – 37% of Czechs have never called customer support and 40% are calling less now than 12 months ago. In the last year, only 26% of clients communicated with their bank via customer service. This is about half the regional average (52%).
“Czechs still don’t feel comfortable communicating with bankers via chat, but more than half the population would be happy with a virtual bank. With the dropping number of branch visits and call centre interactions, live chat with a banker could become a key tool in client communication. With robo-chat, banks could provide 24/7 availability, save on costs and, with the help of artificial intelligence processing huge amounts of client data in real time, improve service quality,” says Pavel Riegger.
Czechs think their banks aren’t innovative enough
The internet is the first place that 8 out of 10 Czechs look for new goods or services, not only via browsers, but also price comparison sites. Only 16% of clients consider their primary bank to be innovative, which is less than Slovakia (21%), Hungary (20%) and Austria (25%). Even fewer Czechs (13%) think of the offering of online services by their primary bank as beating out the competition. Every third Czech(31%) would happily to switch to a competitor that offered better digital services.
“Client acquisition and the sale of products and services are increasingly moving to the internet. The winner will be the one who can identify the emerging needs of the customer and offer corresponding services,” says Pavel Riegger, adding:“Here, we can draw inspiration from non-banking entities like Netflix, which excels at data analysis. Even film and television scripts are written based on data obtained from clients. They know at what moment a plot point, like a murder, should be introduced in order to keep the viewer’s attention. Czech banks have huge untapped potential for online innovation. At a time when most transactions are carried out online, financial institutions have to listen to their clients in order to tailor their services, make them more user-friendly and change how clients perceive their innovation.”
Innovation in online payment has yet to catch on. The Czech Republic is a world leader in the use of contactless payment cards. When it comes to mobile payments, though, it is only slowly catching up with the rest of the world. The survey showed that only 12% of people currently use mobile payment; in Slovakia it’s 14%, in Austria 28% and in Hungary 33%. However, other consumers would like to make mobile payments in the future: 25% in the Czech Republic, 31% in Slovakia, 19% in Austria and 24% in Hungary.